Evaluating PRP : a case study of Thames Water

• Main Author: Thomson, Gregory Peter Kerr
• Published: London School of Economics and Political Science (University of London) 2004
• Subjects: 658.3225
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.415587

Performance Related Pay (PRP) explicitly links the level of pay an employee receives to that employee's performance. Intuitively, it would appear likely that employees would increase their work effort in order to maximise their earnings from PRP. However, there is now a substantial body of research evidence, which suggests that PRP is not particularly effective in increasing employee motivation in practice. Despite this research evidence, PRP continues to remain popular as a payment system amongst firms. This Thesis uses a case study of Thames Water, a large utility company, to examine the paradox between the continuing popularity of PRP and its apparent ineffectiveness as a tool for increasing employee motivation. Evidence from an employee survey and interviews with key managers, together with information from internal company documentation, is brought together to explore five related questions: 1. Why did Thames Water use PRP. 2 How effective has PRP been in Thames Water as a motivator for employees. 3. Why was PRP not more effective as a motivator for employees. 4. How effective was PRP in delivering the other objectives it was originally intended to achieve. 5. Why does Thames Water continue to use PRP. The analytical approach adopted, using three theories of motivation as a framework against which to examine the motivational effectiveness of PRP, provides a new way of looking at the possible limitations on the motivational effect of PRP. This thesis touches on the question of whether and how PRP brings about cultural change; this in turn raises complex questions of causation, which call into question the effectiveness of PRP as a mechanism for bringing about cultural change.